The 5 Best CD Rates of 2020

For both short-term and long-term savings goals

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Certificates of deposit (CDs) may help you grow your money with a healthy annual percentage yield (APY) that you can count on. A CD is a type of savings account with a fixed interest rate and term. But CD features differ from bank to bank. It makes sense to shop for CDs that meet your needs, such as those with the highest rates, flexible withdrawal options, or low minimum deposit requirements. By starting with the right bank or credit union, it may be easy to find the best CD rates that align with your priorities.

The accounts on this list are considered the best because they all feature deposit insurance up to federal limits, have no monthly fees (as long as you stay above the listed minimums), and offer great rates for different periods of time. As you shop for CDs, take note of any early withdrawal penalties, and consider when you might need your money back.

We partnered with QuinStreet to bring you the following CD offers, and below the table, you'll find our top picks for a variety of CD terms.

Best CD Rates of January 2020

  • Connexus Credit Union: Best Overall
  • Ally: Best for Flexible CDs
  • Discover Bank: Best for Long-Term CDs
  • Barclays: Best for a Low Minimum Deposit
  • Capital One: Best CD for Minors

Connexus Credit Union: Best Overall

Anyone can join the Wisconsin-based Connexus Credit Union by making a $5 donation to the Connexus Association, and doing so may be well worth it for the credit union’s CD rates.

Connexus has a range of CD terms, and its 1-, 2-, 3-, and 5-year CDs have solid rates: 2.01% 2.21% APY, 2.31% APY, and 2.41% APY, respectively. Opening an account requires a minimum $5,000 deposit.

What We Like

  • Federally-insured up to NCUA limits

  • Multiple choices with competitive rates

What We Don't Like

  • Requirement to join the credit union, and potentially other organizations

  • High minimum deposit

Ally: Best for Flexible CDs

Although CD investors are typically willing to lock up their cash in exchange for relatively high rates, that’s not always ideal. Perhaps you’re not sure when you’ll need your money, or you think interest rates will rise and don’t want to be stuck with a low rate. Ally Bank offers two types of CDs that provide flexibility.

Raise Your Rate CDs: You can earn 2.05% APY on both 2- or 4-year Raise Your Rate CDs with no minimum deposit or fees. And if rates rise during that time and Ally offers higher rates on the same product you’re using, you can ask them to increase your rate. You have one opportunity to do this with two-year CDs, and you can do it twice with four-year CDs. These CDs have an early withdrawal penalty if you remove funds before the term is up.

No Penalty CDs: You can earn between 1.65% and 1.85% APY on an 11-month CD. There’s no minimum deposit, but you can earn more with bigger balances. The highest rate of 1.85% is available on accounts with deposits of $25,000 or more. After six business days of your initial deposit, you can withdraw your funds at any time with no penalty.

What We Like

  • Multiple options for commitment-averse CD investors

  • Access to funds from the No Penalty CD after just six days

What We Don't Like

  • Lower rates than those available from traditional CDs

Although liquid CDs provide flexibility, there’s a tradeoff. Traditional CDs typically offer the highest initial rates because you’re taking on more risk when you commit to locking up your money.

Discover Bank: Best for Long-Term CDs

If you want to lock in a rate that lasts exceptionally long, Discover Bank offers both 7- and 10-year CDs. You can earn 2.15% APY on a seven-year CD or 2.20% APY on a 10-year CD with minimum required deposit of $2,500. While the extended terms are unique, 10 years is a long time to lock up your money, and you’ll pay an early withdrawal penalty if you need it back. If rates rise during that time, you may be wishing you took a different approach. But if rates fall and stay low (and you just want a safe place to hold cash), these CDs could potentially work well.

What We Like

  • Competitive APY for long-term needs

  • Broad product offering for one-stop-shopping at Discover

What We Don't Like

  • Return might not justify the long-term commitment, though only time will tell

Barclays: Best for a Low Minimum Deposit

If you’re starting small, Barclays offers 2.00% APY on 12- to 48-month CDs, and 2.10% APY for 60-month CDs, with no minimum balance requirement. Rates for shorter terms are not as attractive, but these maturities could be all you need to help grow your savings. Barclays also offers a calculator tool that helps you understand how your money could grow in one of its CDs so you can choose the one that is best for your situation.

What We Like

  • Competitive rates on several CD terms

  • Accessible to savers who don’t have significant resources

What We Don't Like

  • Relatively low rates on short-term CDs

Capital One: Best CD for Minors

When saving for children or others under age 18, Capital One offers one-year CDs paying 2.00% APY that you can open with a minor. An adult needs to be on the account as a joint account owner, but the child can be the primary account owner. There are no minimum balance requirements or monthly fees. Additional terms are available, but this rate is one of the highest available online for one-year CDs.

What We Like

What We Don't Like

  • Joint account holders have access to the child’s funds

How Do CDs Work?

A CD holds your money for a specified length of time (such as six months or two years), and your bank or credit union pays you a fixed rate of interest on your deposit. 

When you use a CD, you typically commit to leaving your money in the account. In return for that commitment, banks usually pay higher interest rates than they offer in more liquid savings accounts. But if you need your money before the term ends, you may have to pay an early withdrawal penalty.

How Do Early Withdrawal Penalties Work?

Banks and credit unions often penalize you for withdrawing funds from a CD before the term is up. In many cases, they calculate the penalty as a certain number of months’ worth of interest. For example, Discover Bank charges six months’ worth of interest if you pull out of a one-year CD early. That penalty increases to 18 months’ worth of interest on five-year CDs.

Paying a penalty is never fun, and it can be particularly problematic when you cash out early in the term. Depending on how long your money was in the CD, you might even receive less back than you originally deposited.

What Are the Risks of CDs?

There’s no such thing as a free lunch. Banks pay more when you take more risk, but some banks provide CDs that build on the traditional structure. Those offerings might allow you to withdraw money early or change the rate on an existing CD. The starting rates on those products tend to be lower than rates on more rigid offerings, but you might be happy to accept that tradeoff if you value flexibility.

You can also use a CD laddering strategy to avoid locking up all of your money. With that approach, you purchase a series of CDs that mature at different times. As a result, a CD matures every six to 12 months, so you have cash available for unexpected needs. For example, if Sally has $10,000 to put into CDs, she might do the following:

  • $2,500 into a six-month CD
  • $2,500 into a 12-month CD
  • $2,500 into an 18-month CD
  • $2,500 into a 24-month CD

Every time one of these CDs matures, she would buy a new 24-month CD with the proceeds to begin the cycle again. 

Rates might be higher or lower when you reinvest into a new CD, but constantly cycling your money could still have benefits. You maintain flexibility and avoid putting all of your money into long-term CDs at a bad time.

Is Money Safe in a CD?

When your funds are federally insured, they’re safe from bank and credit union failures. There may be a brief delay in receiving your funds (or no delay at all) immediately following a bank failure, but when you’re using a CD, you’re probably not planning to use the funds immediately. To verify that your cash is protected, look for the following types of coverage:

  • FDIC insurance at banks
  • NCUA coverage at federally-insured credit unions

Both of these programs insure your money up to $250,000 per depositor, per institution, so it’s critical to keep your balances below the insured limits. You might be able to have more than $250,000 insured at one place, depending on how your accounts are titled.

What Influences CD Rates?

Several factors affect how much you earn from a CD. For starters, banks decide how competitive they want to be. If they have an appetite for new customers, they may nudge rates higher. Economic factors also influence CD rates. As rates rise or fall in financial markets, savings and CD rates tend to move in sympathy, although they might not react immediately (especially when it’s time to pay you more).

The length of your CD is critical. In general, you might expect longer-term CDs to pay more because you’re taking more risk—you’re committing to more months or years of unknowns. But the relationship is not always as direct as you might think. For example, if banks think rates might fall in the next several years, long-term CDs might pay rates that are similar to (or lower than) one- and two-year CDs.

Generally, under normal conditions, long-term CDs have higher rates than short-term CDs. Still, it’s worth comparing rates from several banks for any terms you’re interested in.

What Are Some Alternatives to CDs?

CDs are excellent tools for growing your money, but other products from banks and credit unions might also do the job. Savings accounts also pay interest, but they don’t have fixed rates. That can work in your favor when rates rise. But if rates fall or remain stagnant, you might be better off in a CD.

Money market accounts
are similar to savings accounts, but they may make it easier to spend money from your account. Some money market accounts provide a debit card or checkbook for spending, while others may require you to move your savings to a checking account before you spend.

Article Sources

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  1. Connexus Credit Union. "Connexus Membership." Accessed Jan. 1, 2020.

  2. Connexus Credit Union. "Share Certificates." Accessed Jan. 1, 2020.

  3. Ally. "Raise Your Rate CD." Accessed Jan. 1, 2020.

  4. Ally. "No Penalty CD." Accessed Jan. 1, 2020.

  5. Discover Bank. "CD Rates." Accessed Jan. 1, 2020.

  6. Barclays Bank. "Barclays Online CDs." Accessed Jan. 1, 2020.

  7. Capital One. "Online CDs." Accessed Jan. 1, 2020.

  8. Customer Service Phone Call, Nov. 5, 2019.

  9. FDIC. "Deposit Insurance FAQs." Accessed Jan. 1, 2020.

  10. National Credit Union Administration. "Share Insurance." Accessed Jan. 1, 2020.